Econ Final

The figure above shows the marginal revenue and costs of a perfectly competitive firm. The marginal cost of the last unit produced is

$16 per unit.

If the monopoly illustrated in the figure above could engage in perfect price discrimination, then the lowest ticket price would be

$2.00.

The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is

$200

. In the figure above (Figure 14.I), Nike's economic profit is ________.

$3,000

The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. Assuming there are no changes in technology, in the long run the lowest possible price for corn is ________ per bushel.

$3.00

In the figure above (Figure 14.II), what is Gap's markup?

$50

In the figure above (Figure 14.I), Nike maximizes its profit if it charges ________ per pair of shoes.

$75

Heidi quit her job as a chef making $40,000 per year to start her own restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 per year in wages to the waitresses and hostess and $20,000 per year to buy food. What is Heidi's economic profit for the year?

-$10,000

The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 5 to 6 units?

-$2

John either buys a steak or chicken when dining out. John's marginal utility for steak and chicken is given in the above table. If the price of a steak is $10 and the price of a chicken is $5 and John has $25 to spend on the two goods, what combination of steak and chicken will John consume to maximize his utility?

1 steak and 3 chickens

In the figure above (Figure 14.I), Nike maximizes its profit if it sells ________ pairs of shoes per day

120

Using the above table, what is the average product of labor when Jefferson's Cleaners employs six workers?

14 suits per day

When Alex eats 1 slice of pizza, his total utility is 80; when Alex eats 2 slices of pizza, his total utility is 120. Alex's marginal utility from the second pizza is

40.

The figure above shows a monopoly's total revenue and total cost curves. The monopoly's economic profit is zero if it produces

5 or 20 units of output.

Which area in the above figure shows the consumer surplus at the price and quantity that would be set by a single-price monopoly?

A + B

. ________ is a group of firms that have colluded to limit their output and raise their price.

A cartel

Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry is an example of

monopolistic competition.

A firm's average variable cost is $60, its total fixed cost is $3,000, and its output is 600 units. Its average total cost is

more than $64.

The average return for supplying entrepreneurial ability is the entrepreneur's

normal profit.

Interlace, Inc. produces a unique soda. The company cannot price discriminate. The figure above shows Interlace's demand curve, marginal revenue curve, and marginal cost curve. The quantity of soda Interlace Inc. will choose to produce is ________ because when this quantity is produced, ________.

not efficient; marginal social benefit exceeds marginal social cost

In the above figure, if the price is $12, a profit-maximizing perfectly competitive firm will have an economic profit

of zero, that is, it will break even with a normal profit.

A market structure in which a small number of producers compete against each other is

oligopoly.

The marginal product of labor is the increase in total product from a

one unit increase in the quantity of labor, while holding the quantity of other inputs constant.

The tendency of people to value something more highly when they own it is called the

path dependent effect.

. A positive markup is earned by a firm if its

price exceeds its marginal cost.

Which of the following business practices, if proven to exist, is always illegal under U.S. antitrust law?

price fixing among competitors

Firms in monopolistic competition always will

set their price above their marginal cost

A firm's total fixed cost (TFC) is a cost

that does not change as output changes

Marginal revenue is defined as

the change in total revenue that results from a one-unit increase in the quantity sold.

Marginal cost is calculated as

the increase in total cost divided by the increase in output.

The long run is distinguished from the short run because only in the long run

the quantities of all factors of production can be varied.

Economies of scale refer to

the range of output over which the long-run average cost falls as output increases.

Utility is best defined as

the satisfaction from consuming a good.

A single-price monopoly charges the same price

to all customers for each unit of output they buy.

Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table (Payoff Matrix 15.II). Student 1 should

work regardless of the decision made by student 2.

A behavioral economist will explain Tom's donation to charity by saying that Tom is displaying ________.

bounded self-interest

Sonya's budget for magazines and chocolate bars is $50. Her marginal utility from these goods is shown in the table above. The price of a magazine is $5 and the price of a chocolate bar is $2.50. Sonya currently buys 2 magazines and 16 chocolate bars. To maximize her utility, she should

buy more magazines and fewer chocolate bars.

The price elasticity of demand for any particular perfectly competitive firm's output is

infinite.

Usharani consumes 35 apples a week and 14 loaves of bread. Apples cost $1 each and bread costs $2 per loaf. Usharani is maximizing his utility and finds that the marginal utility from his 35th apple

is half his marginal utility from his 14th loaf of bread.

Price discrimination

is more likely for services than for goods that can be stored and resold.

In the figure above (Figure 14.II), the market for Gap's jackets ________ in long-run equilibrium, and there is ________ for new firms to enter.

is; no incentive

A firm has excess capacity if its output is

less than the quantity at which average total cost is minimized.

Water is cheap and diamonds are expensive because water has a ________, and diamonds have a ________.

low marginal utility; high marginal utility

If an average cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

make zero economic profit, that is, its owners make a normal profit

Monopolistic competition is a market in which ________ firms produce ________ goods and services.

many; differentiated

In perfect competition, the

market demand for the good or service is large relative to the minimum efficient scale of a single producer.

The most important goal of the firm is to

maximize its profits.

A major difference between a single-price monopolist and a perfectly competitive firm is that the

monopolist's marginal revenue is less than price

A natural monopoly that is regulated to set its price equal to its marginal cost

incurs an economic loss.

A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the publisher advertises, what is the marginal revenue if the price is $70? Hint: you need to divide the change in total revenue by the number of books sold at a particular price.

$0

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue's demand and marginal revenue curves are illustrated in the figure above. Sue's Surfboards currently rents 15 surfboards an hour. Sue's total revenue from the 15 surfboards is

$150.

In the long run, for a perfectly competitive market, if economic profit is

All of these answers are correct.

In the long-run equilibrium for a perfectly competitive market

All of these are correct.

When a consumer spends all of his or her income and consumes a bundle of goods such that the marginal utility per dollar from all goods is equal, then the

Both answers consumer's total utility is maximized and consumer is in his or her consumption equilibrium are correct.

Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 4 cents per page, what is Fast Copy's economic profit?

between $0.51 and $1.00 per hour

. Which of the following is NOT a characteristic of the market structure for monopolistic competition?

Firms are price takers.

Two software firms have developed an identical new software application. They are debating whether to give the new app away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above (Payoff Matrix 15.III) and the payoffs are profits in millions of dollars. What is Firm 1's best strategy?

Give away the application regardless of what Firm 2 does.

A monopolistically competitive firm and a monopoly are alike because both I. face downward sloping demand curves. II. have marginal revenue curves that lie beneath their demand curves. III. can make an economic profit in the long run.

I and II

The table above (Payoff Matrix 15.I) displays the possible outcomes for Bob and Joe, who have been arrested for armed robbery and car theft. Which of the following is TRUE?

If Bob confesses, Joe should confess.

Which of the following is ALWAYS true regarding a profit maximizing monopolistically competitive firm in short-run equilibrium?

MR = MC.

Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements CORRECTLY categorizes the Nash equilibrium for the game?

The game has a Nash equilibrium in which both optometrists advertise.

Two firms are deciding whether to enter a new market. The payoff matrix is above (Payoff Matrix 15.IV) and the payoffs are profits in millions of dollars. Which of the following answers is correct? A) There are two Nash equilibria: when both firms enter the new market, as well as when both firms stay out of the new market.

There are two Nash equilibria: when Firm 1 enters the new market and Firm 2 stays out of the new market, as well as when Firm 2 enters the new market and Firm 1 stays out of the new market.

Which of the following cannot be an effective entry barrier?

a firm making very high economic profits

Diminishing marginal returns occurs when

a variable input is increased and output decreases.

The Sherman Act makes it illegal to

attempt to monopolize an industry.

If marginal cost is less than average total cost, then ________ is ________

average total cost; falling

In the above figure, the firm is breaking even at points

b and d.

In the short run, a perfectly competitive firm

can make an economic profit, incur an economic loss, or make zero economic profit

The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1575 and two of the competing banks have considered merging. Because the merger would raise the HHI by 215 points, the Federal Trade Commission would likely

challenge the merger.

In a duopoly with a collusive agreement and in a one-time only game, a firm's profit is largest if it ________ the agreement and if the other firm ________ the agreement.

cheats on; complies with

Deadweight loss measures the inefficiency as the loss of

consumer surplus plus producer surplus.

Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip

incurs an economic loss, but should stay open in the short run.

According to the principle of diminishing marginal utility, as the quantity of a good or service consumed increases, the marginal utility of the last unit consumed

decreases.

Marginal utility theory predicts that as the price of coffee decreases, the ________ a substitute for coffee ________ and the ________ coffee ________.

demand for; decreases; quantity demanded of; increases

If two duopolists can collude successfully, then both will

earn greater profits than if they did not collude.

Firms that survive in the long run are usually those that

earn the largest possible profit.

The Federal Trade Commission is an agency charged with

enforcing antitrust laws.

In monopolistically competitive industries

entry and exit push economic profits toward zero

New reports indicate that eating turnips helps people remain healthy. The news shifts the demand curve for turnips rightward. In response, new farms enter the turnip industry. During the period in which the new farms are entering, the price of a turnip ________ and the economic profit of each existing firm ________.

falls; falls

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy

fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate.

When Frankie spends all his money in such a way that the marginal utility per dollar is the same for all final purchases of products he consumes, Frankie has maximized

his total utility

The above table shows Homer's total utility from boxes of doughnuts. As Homer's consumption of doughnuts increases

his total utility increases, but his marginal utility decreases.

Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals could perfectly price discriminate, then consumer surplus would equal

zero.